Correlation Between Unilever Pakistan and KSB Pumps
Can any of the company-specific risk be diversified away by investing in both Unilever Pakistan and KSB Pumps at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Unilever Pakistan and KSB Pumps into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unilever Pakistan Foods and KSB Pumps, you can compare the effects of market volatilities on Unilever Pakistan and KSB Pumps and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Unilever Pakistan with a short position of KSB Pumps. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever Pakistan and KSB Pumps.
Diversification Opportunities for Unilever Pakistan and KSB Pumps
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Unilever and KSB is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and KSB Pumps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSB Pumps and Unilever Pakistan is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Unilever Pakistan Foods are associated (or correlated) with KSB Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSB Pumps has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and KSB Pumps go up and down completely randomly.
Pair Corralation between Unilever Pakistan and KSB Pumps
Assuming the 90 days trading horizon Unilever Pakistan is expected to generate 2.15 times less return on investment than KSB Pumps. But when comparing it to its historical volatility, Unilever Pakistan Foods is 2.68 times less risky than KSB Pumps. It trades about 0.22 of its potential returns per unit of risk. KSB Pumps is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 12,500 in KSB Pumps on August 31, 2024 and sell it today you would earn a total of 1,430 from holding KSB Pumps or generate 11.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever Pakistan Foods vs. KSB Pumps
Performance |
| Timeline |
| Unilever Pakistan Foods |
| KSB Pumps |
Unilever Pakistan and KSB Pumps Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever Pakistan and KSB Pumps
The main advantage of trading using opposite Unilever Pakistan and KSB Pumps positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever Pakistan position performs unexpectedly, KSB Pumps can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KSB Pumps will offset losses from the drop in KSB Pumps' long position.| Unilever Pakistan vs. Masood Textile Mills | Unilever Pakistan vs. Fauji Foods | Unilever Pakistan vs. KSB Pumps | Unilever Pakistan vs. Mari Petroleum |
| KSB Pumps vs. Masood Textile Mills | KSB Pumps vs. Fauji Foods | KSB Pumps vs. Mari Petroleum | KSB Pumps vs. Loads |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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